The report highlights some of the advantages Amazon brings to the table. The customer-facing infrastructure — from Alexa and Echo devices to an online juggernaut offering an expansive consumer marketplace and digital media center — is unlike anything currently in the insurance space. In addition, Amazon Home Services, which offers on-demand repairs and potential assistance with installing large replacement goods; its array of supported smart home devices; and its direct access to customer purchase history make the company poised to completely transform the claims management process.
Even if Amazon decides against the move, other mega-corporations such as Google, Walmart, and Apple could realistically provide a similar type of digital claims management process with the same scale advantage. Should any of these companies enter the marketplace, they would not only change how claims are managed, but also reset the expectation for what happens after a claim is filed (fulfillment in days not weeks, replacement products sent directly instead of a check, etc.).
The summary provided in the Altus report could easily apply to any of these companies: “Utilising elements of its existing technology and retail offerings would enable Amazon to make Claims Management part of its customer ecosystem, and provide a level of personalisation that sets it apart from the wider industry.” The question, then, is how would the “wider industry” respond?
Applying the Amazon-effect to commercial policies
While Amazon’s model fits more strongly with the consumer market, there are some potential carryovers within the commercial market. Combining purchase history with exposure values can transform the collection reporting process. Utilizing a massive supply chain to exponentially shorten replacement times raises the bar for what people consider an acceptable claim-response period.
Arguably, the Internet of Things (IoT) has a potentially larger impact in the commercial arena when considering fleet operations, connected equipment/facilities, and the practice of using wearables to improve employee workplace safety. Amazon (or a similar 800-lb. gorilla in the market) could not only disrupt the carrier space, but also redefine how aspects of the industry are understood.
Amazon’s Achilles heel — the digital underwriter
While the prospect of competing with a behemoth like Amazon (or Google, or Walmart) is justifiably frightening, the original act that set off this speculation — trying to poach talent from Lemonade — also offers a clue about how carriers can counterpunch. None of these large companies has in-house expertise with claims and underwriting. That means your organization has a weapon that the giants don’t.
Additionally, these companies traditionally reach scale by employing some version of the 80/20 rule, where they focus most of their attention on the 20% of customers/products/issues that generate 80% of the revenue/profits etc. This model may work adequately in the consumer realm, but your clients don’t live in a 20%, “one-size-fits-most” type of world. They have unique challenges and specific goals they have to meet, and they rely on your organization to help them overcome and adapt. Digital underwriting is a way to leverage that relationship and deploy the very expertise that Amazon is apparently trying to absorb.
Redefine the battlefield
Given the advantage Amazon has in customer-facing infrastructure, it makes sense that the company prefers to compete in this arena. As we covered in the article Using Technology to Increase Client Engagement, effective customer-facing interfaces play a critical role in any carrier developing a forward-looking strategy. Although this is a necessary component to focus on, by itself it is not sufficient.
Digital underwriting, on the other hand, is a battlefield much more favorable to the carrier market. Effective commercial underwriters must have a keen sense of risk and decision making. An article in Carrier Management notes: “Accordingly, the underwriter’s role as a decision maker is also evolving, with some underwriters now being called data scientists due to their use of analytics to measure and manage risk.”
Elevating underwriters to the digital underwriter role presents massive opportunities to deliver benefits to clients, which corporate giants cannot easily copy. By taking data from IoT-connected machines, wearables, and fleet telematics, a skilled digital underwriter can create entirely new policy solutions for clients designed on real-time, real-world data and insight. This turns the digital underwriter from an after-the-fact administrative evaluator into a consultative source that can turn noisy data into strategic actions that allow clients to reach their goals. Help clients prevent claims in the first place, and the value you add increases dramatically. That is a difficult role to achieve for anyone blindly following the 80/20 rule.
Moral of the story
More likely than not, some huge corporate organization will seek to at least test the waters of claims management, given the revenue potential and its ability to leverage scale with customer-facing infrastructure and robust supply chains. However, the advantage carriers can gain with client-focused digital underwriting could not only shift the concept of what commercial underwriting can be, but also expose the flaws of a model built around mass markets.
With a flexible system that can handle the types of IoT data the next wave of clients will deploy, policy management and reporting tools that allow underwriters to develop customized product solutions in real time, and an API-friendly platform that allows seamless connections with other systems, your organization will be ready to take on any Goliath that wants to disrupt.
In our Carrier Best Practice Guide, we cover three carrier best practices and how Origami Risk can help achieve them, such as how to grow your business through analytics, how to use technology to increase client engagement, and solutions to digital underwriting challenges.